Definitions and Types of Entrepreneurship
Entrepreneurship in Developing Countries
Factors Influencing Entrepreneurial Activities
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Definitions and Types Entrepreneurship
Few topics in the business area have attracted more attention among academics and journalists than “entrepreneurship”. From an economic perspective, “entrepreneurship” is generally conceptualized as the creation of a new business and the bearing of the risk associated with that business in exchange for profits to be derived from the exploitation of opportunities in the marketplace (e.g., demands of consumers that are not currently being satisfied). Defined in this manner, entrepreneurship can take a variety of different forms. One of the most famous types of entrepreneurship, one that has also become closely aligned with conceptualizations of various forms of entrepreneurship, is Schumpeter’s “creative destruction”. In Schumpeter’s view, the entrepreneur is driven by innovation, which can take the form of a totally new product or process or an innovative change to existing products or processes, which ultimately “destroy”, or render obsolete, products and processes that have been used in the past. While entrepreneurship is often discussed in the context of policies for encouraging and supporting small businesses, Graham observed that entrepreneurship differs from small business in four critical ways: amount of wealth creation, speed of wealth accumulation, risk and innovation.
Research regarding “entrepreneurship” has been made challenging by the absence of a consistent definition of the term across the universe of studies on the topic. According to Stokes et al., the concept of entrepreneurship has existed for centuries and has been important to the development of modern economic and social life. The term itself has been linked to the French word “entreprendre”, which means “to undertake” or “to do something”, and early definitions and descriptions of the concept can be found in works of economists going back as far as the 18th century (e.g., Cantillon, Adam Smith, Say, John Stuart Mill, and Hermann). For example, one of the first uses of the term “entrepreneur” has been attributed to Cantillon, who wrote in the 18th century about individuals who bought materials and means of production at prices that enabled them to combine them into a new product.
Many researchers have focused on the economic function served by the entrepreneur. For example, one of the earliest definitions of entrepreneurship focused on merchants who were willing to assume the risks of purchasing items at certain prices while there was uncertainty about the prices at which those items could eventually be resold. Later definitions began to focus on the risks and challenges associated with combining various factors of production to generate outputs that would be made available for sale in constantly changing markets. Schumpeter was one of the first to include innovation in the definition of entrepreneurship and believed strongly that the proper role of the entrepreneur was creating and responding to economic discontinuities. Others involved in the study of entrepreneurship focus on the personality traits and life experiences of the entrepreneur in an attempt to generate lists of common entrepreneurial characteristics—propensity for “risk taking”, need for achievement and childhood deprivation. While these studies are interesting they have generally been far from conclusive and often have generated conflicting results.
Gartner surveyed the landscape of the attempts to define entrepreneurship and concluded that finding a common definition of the entrepreneur remains “elusive”. Garner quoted an observation made by Cole in 1969: “My own personal experience was that for ten years we ran a research center in entrepreneurial history, for ten years we tried to define the entrepreneur. We never succeeded. Each of us had some notion of it—what he thought was, for his purposes, a useful definition. And I don’t think you’re going to get farther than that”. Garder also pointed out that Borkchuas and Horwitz, who reviewed the literature on the psychology of the entrepreneur in the mid-1980s, struck a similar note when they reported: “The literature appears to support the argument that there is no generic definition of the entrepreneur, or if there is we do not have the psychological instruments to discover it at this time. Most of the attempts to distinguish between entrepreneurs and small business owners or managers have discovered no significant differentiating features”.
Acknowledging the lack of a universally accepted definition of entrepreneurship, Hessels did comment that “[t]here seems to be agreement . . . that entrepreneurship involves the creation of something new”. For Gartner, that “something new” was a “new organization” and he suggested that the most fruitful path for studying entrepreneurship was to view it as a process that includes a series of behaviors and activities intended to create organizations. Davidsson et al. referred to entrepreneurship as “the creation of new economic activity” that occurs both through the creation of new ventures and new economic activity of established firms. Use of the concept of “creation of new economic activity” includes not only the creation of new organizations championed by Gartner but also recognition and exploitation of opportunities, conversion of new ideas into innovations and even imitative behavior that is new to a firm. It is not necessary that the same person or entity that discovered an opportunity actually exploit that opportunity and entrepreneurship should be defined broadly enough to include the sale of opportunities to others. For that matter, discovery of a new technology should not be a prerequisite to entrepreneurship with respect to that opportunity and the concept of entrepreneurship should include actions taken to interpret the capabilities of the technology so as to identify applications of the technology that eventually become the foundation of opportunities.
The Global Entrepreneurship Monitor (“GEM”), a partnership between London Business School and Babson College that has been administering a comprehensive research program since 1999 to produce annual assessments of national levels of entrepreneurial activity, broadly defines entrepreneurship to include “… any attempt at new business or new venture creation, such as self-employment, a new business organization, or the expansion of an existing business, by an individual, teams of individuals, or established businesses”. For further discussion, see “Global Entrepreneurship Monitor” at www.seproject.org. J.G. Burch, who has written extensively on the subject, has referred to entrepreneurship as the “initiation of change” and the “process of giving birth to a new business.” Burch has also developed a list of the following categories of innovations that tend to be the specific byproducts of entrepreneurial activities: introduction of a new product or service that is an improvement in the quality of an existing product or service; introduction of a new process or method that increases productivity; the opening of a new market, particularly an export market in a new territory; the conquest of a new source of supply of raw materials, half-manufactured products or alternative materials; and the creation of a new organization.
For further discussion see Definitions of Entrepreneurship.
The development of thought on the consequences and purposes and goals of entrepreneurship have led to an expansion of the field based on new and different ideas about the processes, behaviors and outcomes associated with entrepreneurship. Among other things, the recent growing recognition of social and environmental issues, and the accompanying opportunities to develop innovation solutions to problems in each of those areas, has led to the emergence of several new types or categories of entrepreneurs in addition to traditional commercial entrepreneurs: environmental entrepreneurs, or ecopreneurs; social entrepreneurs; and sustainable entrepreneurs. Majid and Koe noted that the emergence of these new categories and the expanded focus of entrepreneurs beyond economic considerations represented a significant transition in entrepreneurship from the early 1970s when Friedman, one of the leading economists of his day, went on record as saying that “the social responsibility of business is to increase its profits”. For further discussion see Types of Entrepreneurship.
Entrepreneurship is widely celebrated as an engine for progress that brings growth to the economy, makes the marketplace more competitive, makes individual firms more productive through technological change and creates jobs and added value and welfare for members of society. However, while entrepreneurship is generally lauded for the positive impacts and benefits it has provided to society, it is also true that entrepreneurial activities can have negative consequences such as environmental degradation or unequal distribution of wealth. Recognizing this situation, there have been calls among researchers for entrepreneurial skills and processes to be applied to mitigate and resolve some of the problems that entrepreneurs may have created, an idea which provides the foundation for ecopreneurship, social entrepreneurship and sustainable entrepreneurship. For example, Hall et al. argued that “entrepreneurship may be a panacea for many social and environmental concerns” and Pacheco et al. asserted that entrepreneurs can be an important force for social and ecological sustainability.
For further discussion of entrepreneurship, see “Entrepreneurship” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).
Interest in sustainable development has arisen from concerns about the impact that economic growth would have on the Earth’s finite natural resources and some of the parties involved in that debate argued that while overuse was an issue it would eventually be addressed through market forces. According the York and Venkataraman, there are several different ways that environmental degradation can be addressed:
- Government regulation and control, the so-called “visible hand”; however, while the government has promulgated an expansive portfolio of regulations over the last several decades environmental degradation has continued to occur;
- Stakeholder activism, such as lobbying action by non-governmental organizations focusing on perseveration of natural resources;
- Corporate social responsibility initiatives launched by individual corporations on their own initiative as ethics-based programs to address environmental problems they are responsible for or have association with—initiatives that have been critiqued as being more about doing “less bad” than doing good; and
- Other forms of corporate action which include cost savings and differentiation with an important goal of gain a competitive advantage by implementing environmentally friendly practices (e.g., creating a positive public image by being perceived as a “green business”).
Going down a path on which market forces would eventually address the environmental problems that the market itself created, Gibbs explained the concept of “ecological modernization”, which he described as a process of the progressive transformation and modernization of the institutions of modern society in order to avoid ecological crisis. In this view, it was not just market forces that would “save the Earth”, but also the inert drive of capitalism for innovation that would be harnessed to realize environmental improvements, thus allowing the world to continue forward with “modernization” undeterred by environmental crises. According to Roberts and Colwell: “ecological modernization suggests that it is possible to integrate the goals of economic development, social welfare and environmental protection, and that through this reconciliation synergies will be generated which can be harnessed and put to good use”.
While appealing, there is not sufficient evidence to conclude that ecological modernization is inevitable and it would certainly require cooperation and participation by various actors. Incumbent businesses in the private sector would presumably consider acting in order to gain various advantages: through greater business efficiency due to reduced pollution and waste production; avoiding future financial liabilities, such as the potential cost of contaminated land clean-up; through improved recruitment and retention of the workforce due to the creation of a better work environment; from the potential for increased sales of more “environmentally friendly” products and services; and through the sale of pollution prevention and abatement technologies. As for political institutions, several measures would seem to be appropriate: restructuring of production and consumption towards ecological goals, including the development and diffusion of clean production technologies; decoupling economic development from the relevant resource inputs, resource use and emissions; exploring alternative and innovative approaches to environmental policy, such as “economizing ecology’ by placing an economic value on nature and introducing structural tax reform; and integrating environmental policy goals into other policy areas; and the invention, adoption and diffusion of new technologies and production processes.
In 1987 the World Commission on Environment and Development of the United Nations (generally referred to simply as the “Brundtland Commission”), issued a report which described sustainable development as “a process in which the exploitation of natural resources, the allocation of investments and the process of technological development and organizational change are in harmony with each other for both current and future generations”. The publication of the report fueled what quickly became a comprehensive dialogue on the impact that economic growth was having on the global environment and biodiversity. The early 1990s saw the adoption of extensive new environmental regulations and the emergence of what was referred to as the “green agenda”. Corporate social responsibility was also becoming more important and businesses were beginning to see that integrating ecological concerns into their business models could not only be popular with consumers but also help them reduce costs and the risks associated with operations that might be harmful to surrounding communities and the world generally. Given these changes in behavioral patterns and the rise of social institutions concerned with protecting the environment, the scene was set for the emergence of environmental entrepreneurship, or “ecopreneurship”, which often took the form of startups based on more sustainable business models and deploying processes reflecting greater concern for environmental and, and latterly more social issues.  Like traditional entrepreneurs, ecopreneurs sought to satisfy unmet needs or identify an unresolved problem in the marketplace; however, while traditional entrepreneurs focused on generating economic value, with creating social value being ancillary, an ecopreneur is a mission-driven individual “who starts up a business with ‘green’ initiatives from day one, with strong commitment to transforming a sector of the economy towards becoming more sustainable and environmentally responsible”. Ecopreneurship offered another path to addressing issues of environmental degradation and ecopreneurs did not just run a “green business” but incorporated innovation into a mission that focused on creating value for sustainable development with products and services that not only generated economic growth but also created societal benefits.
Researchers noted that ecological modernization was arguably an area particularly well suited to entrepreneurial action by ecopreneurs. While ecopreneurs have been described as “social activists, who aspire to restructure the corporate culture and social relations of their business sectors through proactive, ecologically oriented business strategies”, they are also able to attack and address environmental issues using the Schumpeterian “process of creative destruction” that includes creating new products, services, processes and “ways of doing work” that challenge, and eventually overturn, conventional methods. As explained by Schaltegger: “ecopreneurs destroy existing conventional production methods, products, market structures and consumption patterns and replace them with superior environmental products and services … [and] … create the market dynamics of environmental progress.” The businesses that they form have been referred to by Isaak as “green-green businesses”, firms that have been founded from the outset on an environmentally friendly basis and with a focused mission on achieving social and ethical transformation of their specific business sectors.
It has been argued that the emergence and success of ecopreneurship has turned on the ability of ecopreneurs to exploit sources of opportunity such as uncertainty and market failure. There is significant uncertainty with respect to the environment and multiple stakeholders continuously struggle to find solutions for problems such as environmental degradation, pollution, waste and contamination and resource depletion. While incumbent companies recognize these problems, they are often reluctant to invest in the development of innovative solutions due to the opportunity costs of their current investments. In contrast, ecoentrepreneurs are willing and eager to accept uncertainty in exchange for the possibility of being rewarded with a premium and also do not have to worry about diminishing the value of their previous investments. Environmental degradation is also a form of market failure: government regulations, subsidies and incentives have proven to be inappropriate and ineffective interventions in many cases and traditional commercial entrepreneurs have struggled to appropriate the gains emanating from their investments in new environmental technology and convince consumers to pay for the related products and services. Ecopreneurs have been successful where the government and commercial entrepreneurs have struggled by engaging customer-focused entrepreneurship that emphasizes identifying specific customer needs for environmental products and services and then addressing another form of market failure, imperfect information, by informing customers about the environmental attributes of products and services and the health and environment effect of methods of production, product contents, product use and post-consumption disposal. See Measuring Environmental Management Performance.
Bell and Stellingwerf noted that a variety of terms have been used to describe “entrepreneurship behavior conducted through an environmental lens” including eco-entrepreneurship, environmental entrepreneurship, Enviropreneurship, green entrepreneurship and green–green businesses. See Definitions and Conceptualizations of Environmental Entrepreneurship. They preferred “ecopreneurship” and included the following examples of definitions and conceptualizations of that term:
- “A person who seeks to transform a sector of the economy towards sustainability by starting up a business in that sector with a green design, with green processes and with a life-long commitment to sustainability”.
- “Entrepreneurs who found new businesses based on the principle of sustainability – Ecopreneurs are those entrepreneurs who start for-profit businesses with strong underlying green values and who sell green products or services”.
- “Individuals or institutions that attempt to popularise eco-friendly ideas and innovations either through the market or non-market routes may be referred to as Ecopreneurs”.
- “Usually the Ecopreneur has a ‘raison d’ˆetre’ that exceeds their desire for profits and often this is associated with making the world a better place to live.”’
- “Ecopreneurs can be classified according to two criteria: (1) their desire to change the world and improve the quality of the environment and life; and (2) their desire to make money and grow as a business venture.”
- Ecopreneurs are visionaries, with the ability to foresee a “demand for fundamental innovations in traditional markets. The challenge is to be economically successful with the supply of products and services that change – on a purely voluntary basis – consumption patterns and market structures, leading to an absolute reduction of environmental impacts”.
- Ecopreneurs are effectively decisive change agents, enabling the world to change its path, are highly motivated in making a difference and displacing unsustainable means, an important transitional role in sustainability.
To learn more, see Typologies of Ecopreneurs.
Bell and Stellingwerf argued that ecopreneurs filled gaps in the marketplace that could not be effectively addressed by large incumbent firms or traditional entrepreneurs. While many established companies appreciate the importance of taking steps to operate in a more environmentally friendly manner, many feel that the sustainability strategies of these companies are “push” strategies driven by their need to comply with the demands of external regulatory bodies and other stakeholders. In contrast, ecopreneurs act to implement “pull” strategies based on actively taking a stance towards becoming “greener” and building a competitive advantage over less “green” firms. As for distinctions between traditional entrepreneurship and ecopreneurship, the following words of Bell and Stellingwerf are instructive: “Entrepreneurs may effectively bring new combinations to the economy—i.e., new products, methods and markets. However, it is the Ecopreneur who plays a critical role in the development process, constructing environmentally friendly products, processes, and services toward the sustainable development objective—‘development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs’.”
While their small size and relative lack of resources appeared to make ecopreneurial startups unlikely candidates for transforming business sectors, many researchers believed that these startups were actually well positioned to identify and exploit innovative technological strategic niches that can not only bring about technological change but also challenge and pressure existing institutions, rules and norms. As explained by Smith, ecopreneurs are “the ‘idealists (producers and supportive users) who initiate a sustainable niche [and] are later joined by entrepreneurial ‘system builders’ who open the niche out to a wider set of users) and, eventually, by serious amounts of capital seeking to profit from the proto-regime”.
For further discussion of ecopreneurship, see Ecopreneurship prepared and distributed by the Sustainable Entrepreneurship Project.
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According to Daft and Marcic, “social entrepreneurship” seeks to launch and build companies that are entirely focused on combining good business with good citizen and the leaders of these companies, the “social entrepreneurs”, are primarily interested in improving society rather than maximizing profits while nonetheless demanding high performance standards and accountability for results. Examples of “for profit” social entrepreneurship run the gambit of commercial activities from partnering with traditional banks to offer microloans to small businesses in developing countries to launching manufacturing facilities in poor areas to provide jobs and produce products that can be distributed at no costs to community members to improve their lives. While many of these businesses are not started with the intent to generate significant profits, a number of them have achieved impressive profits margins and market shares. In addition, Tilley and Young observed that “the concept of social entrepreneur is very broadly interpreted to mean any organization that is operating in a not-for-profit capacity … [including] … community based organizations tackling education, poverty, health, welfare and well-being issues as well as organizations attempting to address environmental concerns relating to renewable energy, waste minimization, pollution abatement and water quality (to name a few)”.
Austin et al defined social entrepreneurship as an “innovative, social value creating business activity that can occur within or across the non-profit, business, or government sectors” and van Eijck observed that the “organizational form is usually based on the most attractive form to gain resources for the social mission”. Dees described social entrepreneurs as companies who play the role of change agents in the social sector by adopting a mission to create and sustain value (not just private value); recognizing and relentlessly pursuing new opportunities to serve that mission; engaging in a process of continuous innovation, adaptation, and learning; acting boldly without being limited by resources currently in hand, and exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.
When writing about social entrepreneurship, some researchers have largely ignored the economic outcomes associated with the entrepreneurial activities while other researchers do acknowledge that economic performance is relevant but cannot be more important than the social goals and objectives. When social entrepreneurship was first recognized it was typically associated with non-profit organizations; however, as time has gone by the conceptualization has broadened and even non-profits have participated in commercial activities to access financial resources for the social activities that would have otherwise been difficult to obtain. Social entrepreneurship can also create competitive advantages similar to those sought by traditional entrepreneurs (e.g., developing and offering innovation solutions to environmental degradation or a social justice problem) that allow social entrepreneurs to enjoy economic returns without impairing or interfering with their social objectives. As such, it is no longer taboo to profit from satisfying humanitarian and ecological needs so long as the profits are reinvested in activities that further the social objectives (e.g., distribute and add value to employment, investments in machines, infrastructure, sponsoring and labor participation). These elements appear in the definition of sustainable, not social, entrepreneurship offered by Crais and Vereeck: “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce”.
Social entrepreneurship was first investigated in the 1990s and emerged naturally with the popularization of ecopreneurship, no surprise given that it was impossible for ecopreneurs to achieve their goal of “changing the world” and improving the overall quality of life without also acting in a socially responsible fashion. In fact, several of the definitions of ecopreneurship presented elsewhere in this chapter explicitly incorporate a social dimension. However, as opposed to the ecological and environmental issues and problems that ecopreneurs were focus on, social entrepreneurship gathered speed on the heels of four trends: global wealth disparity; the growth of the corporate social responsibility movement; market, institutional and state failures; technological advances and shared responsibility.
Lumpkin et al. suggested that both “traditional” and social entrepreneurs have a lot in common and that many entrepreneurial processes used by the two groups remained the same or are affected only slightly (for further discussion see Differentiating between Commercial and Social Entrepreneurship). However, while a traditional entrepreneur measures his or her performance primarily through profits and return on investment, social entrepreneurs generally measure success by creating social capital, social change and addressing social needs. These distinctions are important because they influence the opportunities that social entrepreneurs pursue and their behaviors while operating their businesses (i.e., as opposed to traditional entrepreneurs who are comfortable with and must engage in high risk/high reward behaviors, social entrepreneurs, who are not focused on quick economic profits, are more risk averse but no less committed to their goals of social improvement). As is the case with ecopreneurs, social entrepreneurs are not totally indifferent to profits, or at least “breaking even”, since capital is necessary in order for their businesses to survive over the often lengthy journeys to the desired social impact. This is no small challenge for social entrepreneurs since they often are involved in activities that address a social-market failure caused by a lack of interest of traditional entrepreneurs due to the belief that there is no viable commercial market that will generate an acceptable level of revenues to justify the investment of capital.
Bell and Stellingwerf provided a variety of different definitions and conceptualizations of social entrepreneurship:
- Profit making is not the primary goal of a social entrepreneur and generated profits from market activities should be used for the benefit of a specific disadvantaged group.
- Profit is less important, and the social aspect should be balanced at least equally to profit, a challenge that has been conceptualized as the “double bottom line” that balances both social (people) and economic (profit) returns on investment.
- Social entrepreneurs “play the role of change agents in the social sector, by adopting a mission to create and sustain social value (not just private value), recognizing and relentlessly pursuing new opportunities to serve that mission, engaging in a process of continuous innovation, adaptation, and learning, acting boldly without being limited by resources currently in hand, and exhibiting heightened accountability to the constituencies served and for the outcomes created”.
- Social entrepreneurship “emphasizes innovation and impact, not income, in dealing with social problems” and social entrepreneurs are focused on introducing a novel, innovative technology or approach aimed at creating social impact.
- Social Entrepreneurship is “the innovative use and combination of resources to pursue opportunities to catalyze social change and/or address social needs”.
- “Social Entrepreneurship encompasses the activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner.”
To learn more see Qualities of Social and Sustainable Enterprises.
Like traditional entrepreneurs, social entrepreneurs need to identify and exploit opportunities, create and manage their organizations in innovative ways and, as emphasized by Bell and Stellingwerf, “acquire substantial resources including, human, social and financial capital to not only accomplish their mission, but also to ensure such resources are sustaining the organization’s longevity”. This is often quite challenging to social entrepreneurs who often are surprised to find competition that is intense as what is commonplace in the commercial sector. For example, social entrepreneurs must be able to differentiate themselves from other worthy causes and forge and maintain relationships with a number of stakeholder groups including donors, professional employees, volunteers and the intended beneficiaries of the entrepreneurial initiatives.
Bell and Stellingwerf observed that the obvious similarity between ecopreneurship and social entrepreneurship is that they both incorporate a “double bottom line” within the company’s mission: balancing economic returns with other considerations (i.e., environmental or social impact). This observation is consistent with the views of Schaltegger and Wagner, who wrote:: “Even though the historic trajectories of these types (Eco- & Social Entrepreneurship) differ, it seems that the underlying motivations for the activities are very similar and this seems to make likely a convergence of these currently rather independent literatures”. As discussed below, the anticipated convergence is often defined and described as “sustainable entrepreneurship” or “sustainability entrepreneurship” and is based on the conceptualization the deployment of entrepreneurial tools and practices to solve either an environmental or societal problem (i.e., recognize market imperfections and/or unmet needs in the realms of ecology or society and address them through the introduction of innovative products, services and processes) while maintaining a focus on creating economic value—in other words, businesses that use the “triple bottom line” as their guide.
Several dimensions should be considered when measuring the social impact of entrepreneurial activities: the type of impact on persons and organizations, which can include outputs or outcomes (e.g., incomes, treatment of works, community and environment); the scale of impact, which takes into account the number of people or organizations affected; and the depth of impact, which includes the amount or intensity of positive change in well-being subjectively experienced by the affected people or organizations. These dimensions can be combined to create an overall measure of social impact that incorporates the sum of the positive changes to well-being for all types of impact experienced by all affected people and organizations.
LDC (http://www.ldc.co.uk), a private equity firm based in UK and part of the Lloyds Banking Group, suggested a technical framework for assessing the social value of the activities of a business that included three components:
- Business-Level Benefits: Business-level benefits include the social value that a business creates through its own employment, investment and procurement activities. Direct benefits include scaling and growth of the company’s business and turnover. Indirect benefits include the impact that the company’s business has on other businesses through its supply chains. Finally, induced benefits include the impacts of the company’s workforce spending on other local firms’ goods and services (i.e., multiplier effects).
- Wider Economic Benefits: Wider economic benefits include the social value that a business creates through its job and business impacts on the rest of the national/regional/local economy. These include sector-specific, shared business benefits arising from spatial proximity (i.e., “cluster” growth) and shared business benefits for all sectors arising from higher critical mass of demand for infrastructure.
- Community Benefits: Community benefits include the shared social value that businesses contribute to by participating in partnerships working with local communities to develop solutions to their challenges and needs. Specific community projects include education, learning and skills development; employment and training; health and healthy lifestyle; personal and social well-being; arts, culture and recreation; and climate change and environmental conservation.
For further discussion of social entrepreneurship, see Social Entrepreneurship prepared and distributed by the Sustainable Entrepreneurship Project.
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By the 1990s it was becoming clear that sustainability had “become a multidimensional concept that extends beyond environmental protection to economic development and social equity”—in other words, entrepreneurship guided and measured by the three pillars of the “triple bottom line”. Crals and Vereeck reasoned that “sustainable entrepreneurship” could be interpreted as a spin-off concept from sustainable development and that sustainable entrepreneurs were those persons and companies that contributed to sustainable development by “doing business in a sustainable way”. According to the Brundtland Commission, sustainable entrepreneurship is the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families, the local and global community as well as future generations. This definition recognizes several different stakeholder groups, not just shareholders, must be taken into account when managerial decisions are made and operational activities in furtherance of the organizational purposes are carried out. Crals and Vereeck argued that in order for entrepreneurial activity to be “sustainable” it must recognize, address and satisfy certain standards for each of the 3 P’s of the triple bottom-line described above. Crals and Vereeck observed that the definition of sustainable entrepreneurship was not static given the dynamism of new ideas and standards with respect to the social and natural environment.
Bell and Stellingwerf compiled what they considered to be a representative list of definitions of “sustainable entrepreneurship” that were suggested from 2003 through 2011 and concluded that the definitions collectively identified four defining attributes of sustainable entrepreneurship: balancing environmental and social concerns; economic and non-economic gains to individuals, the economy and society; market failures and disequilibria; and transforming sectors toward sustainability. To learn more about the list of definitions, see Definitions and Conceptualizations of Sustainable Entrepreneurship. From all of this, Bell and Stellingwerf proposed their own definition of sustainable entrepreneurship as “startups that introduce an innovation, with the aim to solve a sustainability-related market failure, which initiates the transformation of an industry toward sustainability”. The “innovation” could take the form of a product, process or service and the sustainability objectives behind these innovations were equally important as the economic objectives associated with them. The use of the term “startups” is intentional and significant as it explicitly differentiates sustainable entrepreneurship from the activities of established organizations, such as corporations, to address sustainable development issues in their environment (i.e., corporate-sustainability/CSR initiatives).
Lawai et al. noted that sustainable entrepreneurs are also subject to many of the same factors that influence commercial entrepreneurs and that the success of both types of entrepreneurs will be influenced by motivating factors, personality characteristics, family support, friend circle/peer group support, management skills and abilities, level of education and environmental forces ((for further discussion see Determinants of Sustainable Entrepreneurship). Market conditions are also obviously very important and Rahman and Singh observed that the chances of entrepreneurial success increase substantially with competitive pricing, power supply, access to latest technology, access to market channels, and access to business associations. Researchers also frequently mentioned government support which can come in many forms: financing, infrastructure development, subsidies for accessing raw materials, and assistance with research and development and access to technology. The government can also serve a valuable role as a customer, not only as a source of revenues for the venture but also as a means for the new venture to test and improve the quality of its products before broader commercial launch.
Young and Tilley emphasized that sustainable entrepreneurship is based on moving beyond “efficiency” to seeking and achieving “sustainability”, a path that was consistent with the evolution in the way in which businesses have encompassed changing attitudes toward environmental and social issues. They explained that when businesses first starting considering environmental issues during the early 1960s their primary concern was controlling pollution and their responses tended to be bolt-on solutions to manage compliance with emerging regulations. Two decades later, beginning in the mid-1980s and extending through the 1990s, businesses identified opportunities to reduce costs through the implementation of environmental management practices: the so-called “eco-efficiency” strategy that was touted as a “win-win” solution that minimized resource consumption and waste while affording companies a competitive advantage. By the beginning of the 21st century, however, environmental management theorists and activists had pivoted toward a new approach: businesses should seek “eco-effectiveness” by adopting business practices that went beyond pollution control and eco-efficiency to operating in a manner that restored and enhanced the environment.
Young and Tilley described sustainable entrepreneurs as entrepreneurs who apply their values to generate a sustainable form of wealth, which means contributing a holistic net benefit to the economy, community and the natural environment. They proposed a model for understanding the concept of “sustainable entrepreneurship”, which they described as an “organization that has sustainability at the center of its structure, operations and management”. The model suggested by Young and Tilley is discussed in Young and Tilley’s Sustainable Entrepreneurship Mode. According to Tilley and Young, a comprehensive and meaningful model of sustainable development had to incorporate social, environmental and economic goals and the elements needed in order for the entrepreneurial activity to be sustainable. Their position with regard to sustainable entrepreneurship has been succinctly explained as follows:
“The sustainable entrepreneur is the only route to fulfilling sustainable development. Firstly, an entrepreneur and their enterprise have to be financially sustainable to survive within the current economic and regulatory systems. An organization just focusing on the environment as its goal without a means of income beyond government subsidy or philanthropy cannot be an entrepreneur, for example, a change of government or change of heart by the philanthropist could remove the income for that organization and stop the environmental work. In addition, concentrating on environmental values causes social damage, that is to say, creating a nature reserve can exclude the local community from resource traditionally harvested from the land the nature reserve now occupies. Similarly, concentrating on the social values can cause financial failure and environmental damage, take a fair trade organization as an example, it can help bring disadvantaged communities out of poverty but if the organization cannot sell the fair trade products its financial failure stops its good work. In addition, the fair trade organization is damaging the environment through transporting goods across the world (contributing to climate change) and having little regard to the impacts of the production process on the environment (depletion of natural resources, pesticides, hazardous waste). Hence only those entrepreneurs that balance their efforts in contributing to the three areas of wealth generation can truly be called a sustainable entrepreneur.”
There is a continuously growing array of techniques and procedures that are available to promote sustainable entrepreneurship and provide companies with standards and guidelines they can follow in developing, implementing and monitoring their sustainable entrepreneurship initiatives. For example, Crais and Vereeck noted that production standards focusing on measuring product quality and performance have been around for a long time and that it is relatively easy to measure whether or not a particular product complies with a standard. The more difficult task is assessing processes that are thought to be necessary in order for sustainable entrepreneurship to be successful. Guidelines for human resources management, eco-design and management systems are available; however, they are often criticized for being either too complex or too general and thus difficult to put into practice. As a result, work continues on developing practical management systems for implementing and tracking sustainability initiatives and integrating sustainability into strategic and business processes. Other tools for sustainable entrepreneurship include sustainability reports, audits, codes, sustainability communication and labels and are discussed in detail in Instruments of Sustainable Entrepreneurship.
For further discussion of sustainable entrepreneurship, see “Sustainable Entrepreneurship” prepared and distributed by the Sustainable Entrepreneurship Project.
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Entrepreneurship is a popular topic for researchers and policymakers around the world and much of the work in the area does not distinguish new businesses by size or strategy. However, it is now widely acknowledged that a sub-class of entrepreneurs, often referred to as “growth-oriented entrepreneurs” or “high-growth entrepreneurs”, can be identified and distinguished by their aspirations relating to job creation, innovation and internationalization, all of which have been positively related to the economic development that is important to so many governments (for further discussion see Entrepreneurship and Economic Development). Acs and Szerb, the creators of the Global Entrepreneurship and Development Index (“GEDI”) (for further discussion, see “Global Entrepreneurship and Development Index” at http://www.seproject.org), argued that international rankings of entrepreneurial activities in various countries should place more weight and importance on the amount of entrepreneurial activity directed toward innovation, high-impact entrepreneurship and globalization focused their research on international entrepreneurship and “the efforts of the early-stage entrepreneur to introduce new products and services, develop new production processes, penetrate foreign markets, substantially increase the number of firm employees, and finance the business with either formal or informal venture capital, or both”. For further discussion see Characteristics of Growth-Oriented Entrepreneurs.
As to what constitutes a “high-growth firm”, Audretsch offered several definitions. For example, the 2007 OECD-Eurostat Manual on Business Demography Statistics defined the term to include: “All enterprises with average annualized growth greater than twenty percent per annum, over a three-year period, and with ten or more employees at the beginning of the observation period. Growth is thus measured by the number of employees and by turnover.” The same source explained “gazelle firms” to be “[a]ll enterprises up to five years old with average annualized growth greater than twenty percent per annum over a three-year period, and with ten or more employees at the beginning of the observation period.” When Delta Economics surveyed “growth oriented” entrepreneurs in BRICSA countries, the US and Europe, it limited its survey to entrepreneurs running relatively young businesses (between 2 and 10 years old) that had turned over a minimum of $300,000 after the second year of trading and found that “growth oriented” businesses shared several common features: high growth rate in turnover; average employment of around 25 people and expectations of doubling the size of the workforce within three years; high likelihood that initial financing came from self-investment, usually from savings; some level of innovation in the way in which they approached their markets, product differentiation or research and development; and international orientation.. For Llisterri and Garcia-Alba, “new, dynamic ventures” in Latin America, Asia and Europe were “firms between three and ten years old that had grown to employ at least 15 workers, and no more than 100, during the study” and which were likely to engage in export activities and compete on innovation (i.e., offering differentiated products or services) rather than price.
As for characteristics of growth-oriented entrepreneurs, noted that there did not appear to be significant differences in the educational background of the founders of the dynamic and less dynamic companies. In most cases, they had attained high education levels and their college degrees had provided them with important technical knowledge, especially for the dynamic entrepreneurs; however, the educational system did little to transfer other skills necessary for successful entrepreneurship. Dynamic entrepreneurs appeared to have distinctly different learning processes for entrepreneurship than their counterparts among the less dynamic companies. For example, the previous work experiences of dynamic entrepreneurs provided significant advantages in terms of gathering information on business ideas and learning the skills necessary to commercialize those ideas. In addition, dynamic entrepreneurs were better able to establish and mine networks of relationships that provided them with valuable support on such things as identifying business opportunities, accessing funds, forging relationships with executives at larger companies and obtaining access to information and non-financial resources such as raw materials or facilities. Delta found that the top four drivers in motivating growth-oriented entrepreneurs worldwide were in order: following a dream; taking advantage of a market opportunity; getting autonomy over the entrepreneur’s time; and “making a lot of money”. While growth is an important facet of growth-oriented entrepreneurship, recognition has also been given to smaller firms that had opportunities to grow, and grow quickly, yet decided that while growth was a sign of health it was better to focus on “other, nonfinancial priorities as well, such as being great at what they do, creating great places to work, providing great service to customers, making great contributions to their communities and finding great ways to lead lives”.
For further discussion see “Growth-Oriented Entrepreneurship” prepared and distributed by the Sustainable Entrepreneurship Project.
Entrepreneurship in Developing Countries
Acs and Virgill observed that the term “entrepreneurship” is often used in several different ways when discussed in connection with developing countries. For example, studies of entrepreneurship in developing countries often focus explicitly and primarily on “small- and medium-sized enterprises” (“SMEs”). In other cases, discussions of entrepreneurial activities in developing countries include persons and firms found in the “informal sector” as well as those engaged in “petty capitalism”. In many cases, combining firms in the informal sector with SMEs in developing regions such as Africa results in a large group of small traders which is collectively responsible for 65%-70% of total GDP and this means that efforts to study and incentivize entrepreneurial activities in developing countries must take into account firms operating both inside and outside the formal institutional framework. Petty capitalism can be found in many forms and has been described as including “small businesses which employ relatively few employees and rely heavily on their owner’s and owner’s family’s labor”. Acs and Virgill cited several examples of petty capitalism including the numerous export enterprises of Hong Kong, the maquila workshops in Mexico and furniture manufacturers in Italy. The terminology landscape in developing countries clearly contrasts with the approach taken by scholars of entrepreneurship in the US and other developed countries—they make a strong distinction between entrepreneurship and SMEs based on their intentions with respect to growth; however, in developing countries it is generally advisable to adopt a broader definition of entrepreneurship that includes SMEs, the informal sector, petty capitalists and the relatively rare dynamic entrepreneur given that each of these actors is capable of generating something that is “new” in what Schumpeter probably meant when he referred to “the humblest levels of the business world”.
Studies of entrepreneurship in developing countries have often focused extensively on distinctions between “necessity-based” and “opportunity-based” entrepreneurs, which is often viewed as a distinction between proprietors who start their own businesses when no other options are available in order to find a way to sustain their families and persons who start businesses with the intent of not only bringing in sufficient income to support themselves and their families but also to generate excess capital that can be reinvested in order to underwrite business growth and development. For example, Mani noted that it is often assumed that economic growth in developing countries will necessarily follow efforts to increase measured levels of entrepreneurship in those countries; however, he observed that “… the reality is more complicated. It is important to distinguish between ‘necessity entrepreneurship’ and ‘opportunity entrepreneurship’. In necessity entrepreneurship, one has to become an entrepreneur because there is no better option for the person involved, whereas opportunity entrepreneurship is an active choice to start a new enterprise based on the perception that an unexploited or underexploited business opportunity exists. Necessity entrepreneurship has little or no effect on economic growth while opportunity entrepreneurship has a positive and significant effect.” For further discussion of studies of entrepreneurship in developing countries, see “Research on Entrepreneurship in Developing Countries” at http://www.seproject.org.
Acs and Szerb, like others, observed that an understanding of entrepreneurship requires going beyond the traits and characteristics of the individual entrepreneur to also consider institutional variables and they noted that “[t]he dynamics of the [entrepreneurial] process can be vastly different depending on the institutional context and level of development within an economy”. They explained that entrepreneurship occurs within an environment that is influenced by economic development and that development directly impacts and strengthens institutions that eventually affect characteristics that are considered to be vitally important to the phenomenon of entrepreneurship such as quality of governance, access to capital and other resources, the perceptions of entrepreneurs and incentive structures for prospective entrepreneurs. Researchers have found evidence that the strengthening of institutions causes more entrepreneurial activity to be shifted toward “productive entrepreneurship” which, in turn, strengthens economic development. Entrepreneurial activity reaches its highest level of intensity as countries go through the innovation-driven stage and eventually levels off as institutions are fully developed and the country has achieved a high level of innovation.
The lack of institutions in many developing countries often results in a shortage of formal employment opportunities in those countries and leaves substantial portions of the population with little choice but to set out on own. So-called “reluctant entrepreneurship” of this type also follows loss of employment, which may be caused by one of the frequent economic shocks that developing countries are prone to suffer. Several extensive studies of global entrepreneurship, including the Global Entrepreneurship Monitor, commonly referred to as the “GEM”, and the Global Entrepreneurship and Development Index, have provided additional information on entrepreneurial types in developing countries, the factors that have motivated them to choose and pursue entrepreneurship and the impact that economic development is likely to have on the face of entrepreneurship in those countries. For further discussion, see “Institutional Environment and Entrepreneurship in Developing Countries” at http://www.seproject.org.
Lingelbach et al. explored some of the factors that they perceived as making entrepreneurs in developing countries “different”. They first noted that researchers had identified several categories of entrepreneurial firms in developing countries including “newly established”, “established but not growing”, “established but growing slowly”, “graduates of a larger size” and, a somewhat recent phenomenon, “new and growth-oriented firms” (similar to “opportunity-based entrepreneurs” mentioned above). Turning their attention to the specifics of building successful growth-oriented firms in developing countries, Lingelbach et al. mentioned the following “distinctive attributes of entrepreneurship in developing countries”:
- Since developing countries lack a “stable of mature markets”, entrepreneurs in those countries have a broader range of opportunities available to them than their counterparts in developed countries. In other words, while entrepreneurs in developed countries generally operate on the fringes of the economy, developing country entrepreneurs can, if they wish, place themselves in the core of their economies pursuing solutions for needs and opportunities that are more widespread.
- The fragmented and immature markets in developing countries reduce the threat of well-established incumbents; however, entrepreneurs must contend with the much higher levels of risk associated with the economic, political and regulatory uncertainties that generally exist in developing countries. Lingelbach et al. suggested that entrepreneurs in developing countries cope with these risks by operating a portfolio of businesses to manage risks through diversification. Capital raised in one business can be used to providing financing for other businesses and Lingelbach et al. suggested that “interlocking businesses provide a source of informal information flow, access to a broader pool of skills and resources and, when well implemented, a brand name that can be leveraged across all businesses”.
- Entrepreneurs in developing countries face significant challenges with obtaining the necessary financial resources and use several strategies to overcome those problems. They typically start downstream businesses to reduce initial capital requirements and gain access to customers and information flow. They also rely on informal funding provided through well-developed family networks rooted in both urban and rural areas—Lingelbach et al. noted that there are “greater pools of private saving in the countryside”.
- Family-owned and –operated businesses remain more common in emerging markets than in developed countries since entrepreneurs in developing countries still lack mentorship and apprenticeship opportunities that can expose them to the skills and experiences needed to launch and expand businesses in challenging environments. Developing country entrepreneurs must have different skills including the ability to “see through the fog of politics and economics in crisis-prone developing countries” and to be perceived as “trustworthy” in a situation where transactions are most often based on trust rather than formal contracting rules.
Factors Influencing Entrepreneurial Activities
Shane et al. were particularly interested in improving the quality and conciseness of research on how human motivations influence entrepreneurship; however, they suggested a model that may well have broader application in the design of an analytical framework for studying the various factors that influence entrepreneurship. Shane et al. believed that entrepreneurship was best viewed as a “process” that occurred over an extended period of time, rather than an isolated event or moment in time when a person decide whether he or she should become an “entrepreneur”. This process included a number of stages, including recognition of opportunities, development of ideas about how to pursue the opportunity by turning it into new products or services and, finally, execution of the activities required to harvest the desired profits from the opportunities. The execution phase involved array of tasks and activities such as evaluating the feasibility of the opportunity, product/service development, assembly of human and financial resources, organizational design and “market making” (i.e., identification and pursuit of customers).
In the model created by Shane et al., the success or failure of the entire entrepreneurial process, and the decisions made along the way, are influenced by several important factors including the motivational traits of the prospective entrepreneur. Gartner described the “trait approach” to studying entrepreneurship as being based on the assumption that “the entrepreneur is . . . a particular personality type, a fixed state of existence, a desirable species that one might find a picture of in a field guide” and explained that research based on this approach has necessarily focused on identifying and enumerating a set of characteristics (i.e., traits) that describe this idealized person type we call an “entrepreneur”. Gartner described the activities of researchers quite simply: “Who is an entrepreneur?” This approach assumes that a person, the “entrepreneur”, is the basic unit of analysis when it comes to studying the launch of a new business and that in order to understand new business creation it is necessary to analyze the characteristics and traits of the entrepreneur and how they “cause” the new business to emerge. Research based on the trait approach has been voluminous and the approach dominated much of the early activities within entrepreneurship research. A comprehensive list of characteristics that researchers have attempted to relate to entrepreneurship would include risk-taking propensity; educational background of the entrepreneur and his/her parents; number of previous jobs and previous job satisfaction; social attitudes; religious, sports and clubs affiliations; age; need for achievement; desire for autonomy and independence; level of aggression; locus of control; perception of opportunities offered by society; self-discipline and perseverance; energy level; self-reliance; desire for success and recognition; tolerance of uncertainty; creativity; support; benevolence; optimism; self-esteem and Machiavellianism. For further discussion, see “Personality Traits of Entrepreneurs” and “Motivational Traits and Their Effect on Entrepreneurship” at http://www.seproject.org.
Shane et al. believed that previous researchers had focused too much on motivational traits of prospective entrepreneurs and had ignored other important factors such as cognitive factors, the nature of the opportunity and environmental conditions. In order to address these concerns regarding the inadequacies of prior research on the relationship of human motivation to entrepreneurship, Shane et al. devised their own “model of entrepreneurial motivation and the entrepreneurial process” that focused on the factors that came into play at the various points where individuals (i.e., “entrepreneurs”) transitioned from one stage of the entrepreneurial process to the next. It was assumed that at each “transition point”, such as moving from “opportunity recognition” to “idea development”, influences might come from one or more categories of factors: entrepreneurial motivations, entrepreneurial opportunities and conditions and cognitive factors. However, the mix of influences in play at a particular stage was not fixed, nor was the relative importance of specific factors. Interestingly, the model did not attempt to identify relationships between any of the factors and traditional measures of “success” or “performance”, such as profitability or growth rates, but simply focused on sensitizing researchers to the influences on the actions that entrepreneurs must take as they pursue development and commercialization of their ideas. In other words, in contrast to earlier models and assumptions Shane et al. recognized that the most relevant effects of factors such as “entrepreneurial motivations” on venture performance and growth may actually be more “indirect” than “direct”.
The elements of the analytical framework suggested by Shane et al. were similar in many ways to those used by Baum et al. in studying the growth of small companies in the architectural woodworking industry. Baum et al. analyzed 29 variables divided among five different domains, including “traits and motivations”, which included motivational factors similar to those described by Shane et al., such as hard work, tenacity and drive; situation-specific motivation, such as goals and self-efficacy; cognitive skills; business strategies; and environmental factors. Interestingly, consistent with the arguments made by Shane et al., Baum et al. found that motivational factors did have an effect on the growth of the ventures included in their study but that the effects were “indirect”, meaning that motives came into play as influencers of other domains such as cognitive skills, situation-specific motivation and business strategies. The various factors and domains identified by Shane et al. and Baum et al. could reasonably be combined into an analytical model of the entrepreneurial process that would incorporate several key factors: entrepreneurial motivations, cognitive factors, entrepreneurial opportunities, environmental conditions, competitive strategies and, finally, certain non-motivational individual differences that have been shown to play an important role on the willingness of people to engage in entrepreneurial activities. For further discussion of environmental conditions, see “Institutional Environment and Entrepreneurship” at http://www.seproject.org.
Notice should also be taken of the “entrepreneurial process model”, which is a conceptual framework proposed by Kantis to analyze and understand the “entrepreneurial process” and facilitate comparison of the conditions confronting prospective entrepreneurs in different countries. While conceding, as others have done, that the entrepreneurial process does not necessarily follow a linear sequence, Kantis suggested that it was useful to analyze that process as three stages of events which, hopefully, lead to the creation of entrepreneurs and entrepreneurial firms. The first stage was “inception of the entrepreneurial venture” and involved three key activities and related questions. First, the prospective entrepreneur needs to acquire the motivation and skills needed to become an entrepreneur and this raises the following questions: what are the motivating factors that first lead a person to think about becoming an entrepreneur?; how does the entrepreneur’s immediate social context influence the motivational process?; and where does an individual find the motivation and skills needed to become an entrepreneur? Second, the business opportunity for the new enterprise must be identified and researchers would like to know the principal sources of business opportunities and how entrepreneurs find and identify these opportunities? Finally, business planning is required during the preparatory phase and the inquiries focus on what information and planning tools do entrepreneurs use? The second stage is “company start-up” and begins with the final decision to begin entrepreneurial activity. Kantis suggested that it is important to understand how entrepreneurs make the final decision to start a new business. Once the decision has been made, the inquiry turns to understanding how entrepreneurs access and mobilize the financial and nonfinancial resources needed to launch a business. The last of the three stages is early development of the firm including introduction to the market of the firm’s goods and services and management of the firm during the early years. The key questions for this stage include what factors influence market entry; what are the main problems confronting entrepreneurs during this phase and how to they deal with those problems; and how do entrepreneurs finance firm operations and growth?
Having defined and explained the “entrepreneurial process”, Kantis suggests that a model of an “entrepreneurial development system” can be created by adding in a combination of elements and factors that have an impact, both positive and negative, on the process and, ultimately, on the efficient development of entrepreneurs and entrepreneurial firms. Kantis grouped these factors into a short list of categories, which he introduced and described as follows:
- Social and economic conditions reflect the profile of the households from which potential entrepreneurs emerge and take into factors such as the degree of social fragmentation, access to education, flow of information relevant to entrepreneurial activity, income levels and overall macroeconomic conditions such as the behavior of demand or the degree of economic stability;
- Societal culture, which is discussed in detail in “Societal Culture and Entrepreneurship” at http://www.seproject.org, influences the formation of the “entrepreneurial spirit” and cultural values impact important factors such as the social value ascribed to the entrepreneur and attitudes toward the risk of failure;
- Productive structure and dynamism refers to the sector and regional profile and the size of the existing enterprises and institutions and is considered important because it determines the type of work and professional experience, including opportunities for development of entrepreneurial skills and networks of relationships (see below), which individuals can obtain prior to becoming entrepreneurs;
- Personal aspects, which refers to socio-demographic profile of the entrepreneur—which are influenced by his or her family, educational and work environments—and his or her entrepreneurial skills (e.g., propensity to assume risk, tolerance for hard work, managerial capacities, and creativity);
- Networks, which include the assistance provided through his or her social networks (i.e., friends and family), institutional networks (i.e., business associations, institutions of higher learning and/or development agencies) and commercial networks (i.e., suppliers and customers);
- Factor markets, which provide entrepreneurs with access to financial resources (e.g., bank loans, venture capital and/or government financing), skilled labor and professional services (accountants, consultants, etc.) and suppliers of inputs and equipment; and
- Regulations and policies that have an impact on enterprise creation, such as taxes, procedural requirements for formally establishing a new firm and initiatives and programs to develop entrepreneurship.
Environmental conditions and institutional support are both frequently mentioned as important factors influencing the intensity and type of entrepreneurship and there has been extensive interest in the study of “entrepreneurial ecosystems” that can be created within a geographic area, often referred to as an “innovation cluster” to provide entrepreneurs with the resources and tools they need to launch their companies, typically new ventures focused on achieving high growth. For further discussion, see “Innovation Clusters and Entrepreneurial Ecosystems” at http://www.seproject.org.
Entrepreneurship comes to fruition through the actions of “founders”: the persons who eventually make the commitment to form and organize a new venture. Being a “founder” can be exciting; however, even when armed with the most promising business idea, founders inevitably face a number of challenges from the moment they begin to consider whether or not to form a new company. Wasserman argued that founders must confront a number of “founders’ dilemmas” that require difficult decisions with respect to relationships, roles and rewards and must also honestly assess their own goals and motivations for launching the company and make sure that the choices they make along the way regarding adding members to the founding group, allocating duties and responsibilities, establishing reward systems and brining on the human resources and investors necessary to stabilize and growth the business remain aligned with those goals. For further discussion, see “Founder’s Dilemmas” at http://www.seproject.org.
One of the most important, and sensitive, steps in launching a new business is defining the relationships of the members of the founding group to one another and the negotiation and drafting of management, employment and/or buy-sell agreements that describe those relationships in legal terms. Regardless of the form of business entity selected for operation of the business, the founders need to sit down and carefully discuss the ownership structure for the company and the relationship that will exist among the founders with respect to the management of the business. When properly done, the ownership structure will protect the rights of each founder while creating incentives to make the business grow well into the future. The structure should always be flexible enough to adapt to future changes, including new employees and capital-raising from outside investors. Among the questions that need to be asked are the following:
- What percentage of the company will be owned by each founder?
- What tangible contributions (e.g., money, property, contract rights, etc.) will each founder make to the company and how will they be valued?
- How much time will the participants be expected to devote to the business?
- What incentives will be used to motivate each of the founders to remain actively involved with the business of the company?
- What procedures should be followed when a founder dies, becomes disabled, reaches retirement age, or voluntarily leaves the company prior to retirement age?
- What procedures should be followed to expel a founder from the company?
- Are there other persons outside the founding group who are likely to become actively involved in the business of the company?
In addition, the founders must seriously anticipate and attempt to address potentially contentious matters relating to management and control of the business. For example, decisions must be made regarding the voting rights of each of the founders and their power to control membership of the board of directors or other management body. Some of the key issues that need to be considered include the following:
- What voice will each founder have in the election of the members of the managing body of the entity, such as the board of directors?
- Who will be responsible for the day-to-day operations of the business (e.g., officers of a corporation)?
- What level of consensus among the founder group will be required for major transaction, such as sale or merger of the company, major debt financings, and issuances of securities?
- What are to be the terms of any employment agreements between the company and the founders, including the amount of salary and other benefits to be paid to owners who are to be active in the business?
- What procedures should be used to resolve any disputes among the members of the founding group?
- How are the members of the founding group going to participate in the profits generated by the business?
- What restrictions should be placed on the outside activities of the founder, as well as their ability to transfer their ownership interests in the company?
For further discussion, see “Fundamental Questions Regarding Founders’ Relations” at http://www.seproject.org.
Another issue to consider is the obligations that founders may have to their current and former employers. For example, in the US the founders, like any other employees, owe certain general duties to their employer regardless of whether or not the employee has a specific employment-related contract. The scope of the duty, and its impact on any new venture that the founder intends to pursue, will depend on a variety of things, such as whether the founder is deemed a skilled or unskilled employee. The type of new business is also an important factor in determining whether a founder violates his or her obligations to a current employer. In general, a person may not engage in a competing business; however, an employee may, in the absence of a written restriction in an employment agreement, establish a noncompeting business so long as it does not interfere with the employee’s ability to properly discharge his or her obligations in the current position. But, the employee must be careful not to use the employer’s resources to conduct the new business and must also limit his or her activities to periods outside of regular working hours. In addition to the restrictions on competition that apply during the employment term, it is common in the US for former employees to be under contractual restrictions that continue to apply for some period of time following their departure, including non-disclosure and non-competition agreements and agreements to assign intellectual property rights. Many of the legal principles described above with respect to duties and obligations to current and former employers are also applicable in countries other than the US; however, the founders should always consult qualified local counsel in their home country before proceeding too far down the path of planning to leave their current employers to launch a new business.
For further discussion, see “Founders’ Pre-Formation Duties and Liabilities” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).
The founders may be more interested in spending time on developing their new products and services than on dealing with what can often be very difficult and divisive issues. However, if these questions are not addressed at the beginning of the venture, it is likely that trouble will erupt down the road. The members of the founding group should enter into an agreement among themselves as to how the company will be operated. Assuming for illustrative purposes that the founders have selected the corporate form for their new business, the agreement is generally referred to as an “agreement to incorporation” and should be valued as an opportunity to reduce to writing the understanding of the founders regarding the general terms and conditions associated with the formation and initial organization of the new corporation. The content of an agreement to incorporate will vary depending upon the circumstances; however, the matters commonly covered in such an agreement include the names and addresses of the founders; the proposed name of the corporation and a description of the procedures that will be followed to check the availability of the name and reserve it for future use on behalf of the corporation; a description of the proposed purpose and activities of the corporation; a summary of the place or places where it is anticipated that the corporation will conduct its business, including a statement of the procedures that will be followed in order to qualify the corporation as a foreign corporation; a description of the proposed capitalization of the corporation, including subscriptions by the parties; a list of the incorporators, initial directors and officers of the corporation; and a description of the terms of engagement of any persons required to assist in the incorporation process, such as lawyers, accountants or appraisers.
Other matters which might be covered in an agreement to incorporate include a description of the terms of any proposed employment relationship between the new corporation and any of the parties; the general terms of any share transfer restrictions and/or buy-sell arrangements among the corporation and its future shareholders; a description of any proposed purchase of assets by the new corporation, which will be relevant whenever the new corporation is going to take over the operations of a going concern; and a description of the procedures that will be followed in offering shares to persons not otherwise affiliated with the founding group, including the preparation of an offering document, engagement of finders and payment of the fees and expenses associated with complying with any securities law requirements.
The agreement to incorporate is also the place to address specific tax and regulatory issues associated with the formation and operation of the new corporation. For example, if the new corporation is being formed in the US and the founders wish to have it treated as a Subchapter S corporation for federal income tax purposes, the agreement should contain various covenants regarding the steps that will be taken to perfect and maintain Subchapter S status. In the case of regulated businesses it will be necessary to ensure that the corporation can obtain the appropriate license or permit. Compliance with securities laws should also be addressed if shares will be offered to outside parties. Finally, if an existing legal entity, such as a partnership, is being converted to a corporation, agreement should be reached on the assets that will be transferred to the new corporation and the number of shares that the owners of the old entity will receive in exchange and attention must be paid to ensuring that they achieve the tax treatment they are expecting with respect to the conversion.
A tremendous amount of time and effort goes into launching a new business and a lot of the activity occurs before the legal entity for the new business is actually formed and organized. During this period the founders may enter into one or more “pre-formation agreements”, which include various contracts among the founders regarding the future organization of the business and prospective contractual arrangements negotiated on behalf of the new business entity “in formation” with others who may contribute cash, services or assets once the entity is up and running. Pre-formation agreements generally only become operative once the formation process mandated by statute for the particular form of legal entity has been completed, save for obligations to third parties and agreements among the founders regarding responsibility for the costs and expenses of the formation activities. In the US, if the pre-formation agreements will proceed the formation and organization of a new corporation, the formal process of forming a corporation will require either the filing of articles of incorporation with the secretary of state of the state of incorporation or the issuance of a certificate of incorporation by the secretary of state following filing of the articles depending on the statutory requirements of the state of incorporation. A corporation cannot be formed legally in the US unless it is organized in compliance with the governing statutory provisions. If no bona fide attempt is made to comply with the statutes, the organization or association formed has no legal existence as a corporation and persons who purport to act on its behalf may be held personally liable as partners.
The founders, working with their legal and accounting advisors, should think of pre-formation agreements as opportunities to lay out the ground rules for the organization, capitalization and management of the proposed business and the drafting process may touch on key issues such as establishing the best structure for the new business, allocation of ownership, contributions to the new business, managerial responsibilities, employment arrangements, raising capital from outsiders, engagements with professional advisors and restrictions on transfers of ownership interests. One of the most important pre-formation agreements will be among the founders themselves and will cover the issues referred to above in the discussion of the contents of an “agreement to incorporate”. In addition, it is common for the founders to enter into other pre-formation agreements covering activities of promoters and finders, subscriptions and stock purchases, personnel issues and outside service providers. For detailed discussion of pre-formation agreements, see “Founders’ Relationships and Agreements” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).
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Back to Contents.
 S. Graham, What Is Sustainable Entrepreneurship? (September 16, 2010), http://ezinearticles.com/?What-Is-Sustainable-Entrepreneurship?&id=5045492
 S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 274.
 D. Stokes, N. Wilson and M. Mador, Entrepreneurship (Hampshire, UK: South-Western Cengage Learning, 2010).
 J. Veciana, “Entrepreneurship as a Scientific Research Program” in A. Cuervo, D. Ribeiro and S. Roig (Eds.), Entrepreneurship: Concepts, Theory and Perspective (Berlin, Heidelberg: Springer-Verlag, 2007), 23.
 F. Tilley and Young, “Sustainability Entrepreneurs — Could they be the True Wealth Generators of the Future?”, Greener Management International, 55 (2009), 79 (citing P. Hisrich and M. Peters, Entrepreneurship (International Edition) (Boston: Irwin McGraw-Hill, 1998)).
 W. Gartner, “’Who is an Entrepreneur?’ Is the Wrong Question”, American Journal of Small Business, Spring 1988, 11-32, 11 (citing, among others, A. Carsrud, K. Olm and G. Eddy, “Entrepreneurship: Research in quest of a paradigm”, in D. Sexton and R. Smilor (Ed.), The Art and Science of Entrepreneurship (Cambridge, MA: Ballinger, 1985); and D. Sexton and R. Smilor, “Introduction” in D. Sexton and R. Smilor (Ed.), The Art and Science of Entrepreneurship (Cambridge, MA: Ballinger, 1985))
 Id. (quoting A. Cole, “Definition of Entrepreneurship” in J. Komives (Ed.), Karl A. Bostrom Seminar in the Study of Enterprise (Milwaukee, WI: Center for Venture Management, 1969), 10-22, 17)
 Id. (quoting R. Brockhaus and P. Horwitz, “The Psychology of the Entrepreneur” in D. Sexton and R. Smilor (Ed.), The Art and Science of Entrepreneurship (Cambridge, MA: Ballinger, 1985), 42-43)
 J. Hessels, International Entrepreneurship: An Introduction, Framework and Research Agenda (Zoetermeer, The Netherlands: Scientific Analysis of Entrepreneurship and SMEs, 2008), 6 (citing P. Reynolds, N. Bosma, E. Autio, S. Hunt, N. De Bono, I. Servais, P. Lopez-Garcia and N. Chin, “Global Entrepreneurship Monitor: Data Collection Design and Implementation 1998-2003”, Small Business Economics, 24(3) (2005), 205-231).
 W. Gartner, “’Who is an Entrepreneur?’ Is the Wrong Question”, American Journal of Small Business, Spring 1988, 11-32, 26. Gardner argued that all of the different studies of entrepreneurship that can be identified in the field actually begin with the creation of new organizations including research on “psychological characteristics of entrepreneurs, sociological explanations of entrepreneurial cultures, economic and demographic explanations of entrepreneurial locations, etc.”. Id.
 P. Davidsson, F. Delmar and J. Wiklund, “Entrepreneurship as Growth; Growth as Entrepreneurship” in P. Davidsson, F. Delmar and J. Wiklund (Eds), Entrepreneurship and the Growth of Firms (Cheltenham, UK: Edward Elgar Publisher, 2006), 21-38, 27.
 J. Hessels, International Entrepreneurship: An Introduction, Framework and Research Agenda (Zoetermeer, The Netherlands: Scientific Analysis of Entrepreneurship and SMEs, 2008), 6.
 For further discussion of the GEM, see “Research in Entrepreneurship” in “Entrepreneurship: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).
 J.G. Burch, Entrepreneurship (New York: John Wiley & Sons, 1986).
 E. Crals and L. Vereeck, “Sustainable entrepreneurship in SMEs. Theory and Practice” (Copenhagen: 3rd Global Conference in Environmental Justice and Global Citizenship, February 2004); G. Dees, The Meaning of Social Entrepreneurship (Stanford: Stanford University – Graduate School of Business, 2001); M. Schaper, “The Essence of Ecopreneurship”, Greener Management International, 38 (2002), 26; W. Young and F. Tilley, “Can Businesses Move Beyond Efficiency? The Shift toward Effectiveness and Equity in the Corporate Sustainability Debate”, Business Strategy and the Environment (2006); and R. Isaak, Green Logic: Ecopreneurship, Theory and Ethics (Sheffield, UK: Greenleaf Publishing, 1998).
 I. Majid and W-L. Koe, “Sustainable Entrepreneurship (SE): A Revised Model Based on Triple Bottom Line (TBL)”, International Journal of Academic Research in Business and Social Sciences, 2(6) (June 2012), 293, 297 (citing M. Friedman, “The Social Responsibility of Business is to Increase its Profits”, The New York Times Magazine (September 13, 1970)).
 See, e.g., B. Cohen and M. Winn, “Market Imperfections, Opportunity and Sustainable Entrepreneruship”, Journal of Business Venturing, 22(1) (2007), 29; and T. Dean and J. McMullen, “Toward a Theory of Sustainable Entrepreneurship: Reducing Environmental Degradation through Entrepreneurial Action”, Journal of Business Venturing, 22(1) (2007), 50.
 J. Hall, G. Daneke and M. Lenox, Sustainable Development and Entrepreneurship: Past Contributions and Future Directions, Journal of Business Venturing, 25(5) (2010), 439; K. Hockerts and R. Wüstenhagen, “Greening Goliaths Versus Emerging Davids: Theorizing about The Role of Incumbents and New Entrants in Sustainable Entrepreneurship”, Journal of Business Venturing, 25(5) (2010), 481; I. O’Neil and D. Ucbasaran, Sustainable Entrepreneurship and Career Transitions: The Role of Individual Identity. Conference proceedings in 8th International AGSE Entrepreneurship Research Exchange Conference, February 1-4, 2011, Swinburne University of Technology, Melbourne, Australia; B. Parrish, “Sustainability-Driven Entrepreneurship: Principles of Organization Design”, Journal of Business Venturing, 25(5) (2010), 510; and F. Tilley and W. Young, “Sustainability Entrepreneurs: Could They Be the True Wealth Generators of the Future?”, Green Management International, 55 (2009), 79.
 I. Majid and W-L. Koe, “Sustainable Entrepreneurship (SE): A Revised Model Based on Triple Bottom Line (TBL)”, International Journal of Academic Research in Business and Social Sciences, 2(6) (June 2012), 293, 296 (citing J. Hall, G. Daneke and M. Lenox, Sustainable Development and Entrepreneurship: Past Contributions and Future Directions, Journal of Business Venturing, 25(5) (2010), 439, 440; and D. Pacheco, T. Dean and D. Payne, “Escaping the Green Prison: Entrepreneurship and the Creation of Opportunities for Sustainable Development”, Journal of Business Venturing, 25(5) (2010), 464).
 J. York and S. Venkataraman, “The Entrepreneur-Environment Nexus: Uncertainty, innovation, and allocation” , Journal of Business Venturing 25(5) (2010), 449.
 D. Gibbs, “Sustainability Entrepreneurs, Ecopreneurs and the Development of a Sustainable Economy”, Greener Management International, 55 (September 2006), 63, 66.
 R. Beveridge and S. Guy, “The Rise of the Eco-preneur and the Messy World of Environmental Innovation”, Local Environment, 10.6 (2005), 665, 666.
 P. Roberts and A. Colwell, “Moving the Environment to Centre Stage: A New Approach to Planning and Development at European and Regional Levels”, Local Environment, 6.4 (2001), 421, 424.
 J. Drysek, The Politics of the Earth: Environmental Discourses (Oxford, UK: Oxford University Press, 1997) (as cited in D. Gibbs, “Sustainability Entrepreneurs, Ecopreneurs and the Development of a Sustainable Economy”, Greener Management International, 55 (September 2006), 63, 67).
 A. Gouldson and J. Murphy, “Ecological Modernisation: Restructuring Industrial Economies”, in M. Jacobs (ed.), Greening the Millennium? The New Politics of the Environment (Oxford, UK: Blackwell, 1997), 74 (as cited in D. Gibbs, “Sustainability Entrepreneurs, Ecopreneurs and the Development of a Sustainable Economy”, Greener Management International, 55 (September 2006), 63, 66).
 United Nations World Commission on Environment and Development, Our Common Future (New York: Oxford University Press, 1987).
 D. Holt, “Where Are They Now? Tracking the Longitudinal Evolution of Environmental Businesses from the 1990s”, Business Strategy and the Environment, 20(4) (2010), 238.
 See D. Holt, “Where Are They Now? Tracking the Longitudinal Evolution of Environmental Businesses from the 1990s”, Business Strategy and the Environment, 20(4) (2010), 238; and J. Randjelovic, A. O’Rourke and R. Orsato, “The emergence of green venture capital”, Business Strategy and the Environment, 12(4) (2003), 240, 241.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 7 (citing R. Isaak, “The Making of the Ecopreneur”, Greener Management International, 38 (2002), 81).
 M. Schaper, Making Ecopreneurs: Developing Sustainable Entrepreneurship (Aldershot, UK: Ashgate, 2005).
 R. Isaak, Green Logic: Ecopreneurship, Theory and Ethics (Sheffield, UK: Greenleaf Publishing, 1998), 88.
 J. Schumpeter, The Theory of Economic Development (Cambridge, MA: Harvard University Press, 1934).
 S. Schaltegger, “A Framework for Ecopreneurship: Leading Bioneers and Environmental Managers to Ecopreneurship”, Greener Management International, 38 (2002), 45, 46.
 R. Isaak, Green Logic: Ecopreneurship, Theory and Ethics (Sheffield, UK: Greenleaf Publishing, 1998), 87.
 P. van Eijck, Sustainable Entrepreneurship: Institutional profile and cross-country comparison Denmark & US and its Viability (Rotterdam: Bachelor Thesis in Entrepreneurship, Strategy and Organizations Economics from Erasmus School of Economics, January 2012), 10.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 7 (citing S. Schaltegger, “Chapter 4: A framework and typology of Ecopreneurship: leading bioneers and environmental managers to Ecopreneurship” in M. Shaper (Ed.) Making Ecopreneurs: Developing Sustainable Entrepreneurship (Burlington: Ashgate Publishing Company, 2005), 43). For a brief summary and critique of research on ecopreneurship, see D. Gibbs, “Sustainability Entrepreneurs, Ecopreneurs and the Development of a Sustainable Economy”, Greener Management International, 55 (September 2006), 63, 73-74.
 Id. at 7-8.
 R. Isaak, “The Making of the Ecopreneur”, Greener Management International, 38 (2002), 81.
 J. Kirkwood and S. Walkton, “What motivates Ecopreneurs to start a business?”, International Journal of Entrepreneurial Behaviour & Research, 16(3) (2010), 204.
 A. Pastakia, “Grassroots Ecopreneurs”, Journal of Organisational Change Management, 11(2) (1998), 157.
 L. Linnanen, “An insider’s experiences with environmental entrepreneurship”, Greener Management International, 38 (2002), 71.
 Id. (cited in C. Rogers, “Sustainable Entrepreneurship in SMEs: A Case Study Analysis”, Corporate Social Responsibility and Environmental Management, 17 (2010), 125).
 S. Schaltegger and M. Wagner, “Sustainable Entrepreneurship and Sustainability Innovation: Categories and Interactions”, Business Strategy and the Environment, 20 (2011), 222.
 B. Cohen and M. Winn, “Market imperfections, opportunity and Sustainable Entrepreneurship”, Journal of Business Venturing, 22(1) (2007), 29.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 8.
 Id. at 8-9.
 D. Gibbs, “Sustainability Entrepreneurs, Ecopreneurs and the Development of a Sustainable Economy”, Greener Management International, 55 (September 2006), 63, 68.
 A. Smith, “Transforming Technological Regimes for Sustainable Development: A Role for Alternative Technology Niches?”, Science and Public Policy, 30.2 (2003), 127, 130.
 R. Daft and D. Marcic, Understanding Management (5th Edition) (Mason, OH: South-Western Publishing Co., 2006), 147-148.
 F. Tilley and Young, “Sustainability Entrepreneurs — Could they be the True Wealth Generators of the Future?”, Greener Management International, 55 (2009), 79.
 J. Austin, H. Stevenson and J. Wei-Skillern, “Social and Commercial Entrepreneurship: Same, different, or both?”, Entrepreneurship Theory and Practice, 30(1) (2006), 1, 2.
 P. van Eijck, Sustainable Entrepreneurship: Institutional profile and cross-country comparison Denmark & US and its Viability (Rotterdam: Bachelor Thesis in Entrepreneurship, Strategy and Organizations Economics from Erasmus School of Economics, January 2012), 7.
 J. Dees, The Meaning of Social Entrepreneurship (Stanford: Stanford University Graduate School of Business, 1998).
 P. Dacin, M. Dacin and M. Matear, “Social Entrepreneurship: Why we don’t need a new theory and how we move forward from here”, Academy of Management Perspectives, 24(2) (2010), 36.
 J. Dees, “Enterprising nonprofits”, Harvard Business Review 76(1) (1998), 54.
 P. van Eijck, Sustainable Entrepreneurship: Institutional profile and cross-country comparison Denmark & US and its Viability (Rotterdam: Bachelor Thesis in Entrepreneurship, Strategy and Organizations Economics from Erasmus School of Economics, January 2012), 7-8.
 E. Crals and L. Vereeck, “The Affordability of Sustainable Entrepreneurship Certification for SMEs.” International Journal of Sustainable Development & World Ecology 12(2) (2005), 173.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 9.
 S. Dixon and A. Clifford, “Managing Ecopreneurship – a new approach the triple bottom line”, Journal of Organisational Change Management, 20(3) (2007), 326.
 S. Zahra, H. Rawhouser, N. Bhaw, D. Neubaum and J. Hayton, Globalisation of Social Entrepreneurship Opportunities. Strategic Entrepreneurship Journal. 2 (2008), 117.
 G. Lumpkin, T. Moss, D. Gras, S. Kato and A. Amezua, “Entrepreneurial processes in social contexts: how are they different, if at all?”, Small Business Economics (2011), 1.
 D. Bornstein, How to Change the World: Social Entrepreneurs and the Power of New Ideas (New York: Oxford University Press, 2004), 15.
 See J. Austin, H. Stevenson and J. Wei-Skillern, “Social and commercial entrepreneurship: Same, different, or both?”, Entrepreneurship: Theory and Practice, 30(1) (2006), 1, 2 (stating that the existence of social-purpose organizations emerge when there is a social-market failure, i.e., commercial market forces do not meet a social need).
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 10.
 C. Leadbeater, The rise of the social entrepreneur (London: Demos, 1997).
 S. Zahra, H. Rawhouser, N. Bhaw, D. Neubaum and J. Hayton, Globalisation of Social Entrepreneurship Opportunities. Strategic Entrepreneurship Journal. 2 (2008), 117.
 G. Dees, The Meaning of Social Entrepreneurship (1998).
 G. Dees, New definitions of Social Entrepreneurship: free eye exams and wheelchair drivers (2003).
 J. Mair and I. Martı´, “Social Entrepreneurship research: a source of explanation, prediction, and delight”, Journal of World Business, 41(1) (2006), 36.
 S. Zahra, E. Gedajlovic, D. Neubaum and J. Shulman, “A Typology of Social Entrepreneurs: Motives, Search Processes and Ethical Challenges”, Journal of Business Venturing, 24(5) (2009), 519.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 11.
 S. Zahra, E. Gedajlovic, D. Neubaum and J. Shulman, “A Typology of Social Entrepreneurs: Motives, Search Processes and Ethical Challenges”, Journal of Business Venturing, 24(5) (2009), 526.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 12.
 S. Schaltegger and M. Wagner, “Sustainable Entrepreneurship and Sustainability Innovation: Categories and Interactions”, Business Strategy and the Environment, 20 (2011), 222, 226.
 See B. Cohen, B. Smith and R. Mitchell, “Toward a sustainable conceptualisation of dependent variables in entrepreneurship research”, Business Strategy and the Environment, 17(2) (2008), 107; and B. Cohen and M. Winn, “Market imperfections, opportunity and Sustainable Entrepreneurship”, Journal of Business Venturing 22(1) (2007), 29.
 Adapted from M. McCreless and B. Trelstad, “A GPS for Social Impact”, Stanford Social Innovation Review (Fall 2012), 21.
 T. Gladwin, J. Kennelly and T. Krause, “Shifting paradigms for sustainable development”, Academy of Management Review, 20(4) (1995), 874.
 E. Crals and L. Vereeck, “Sustainable entrepreneurship in SMEs—Theory and Practice”, http://www.inter-disciplinary.net/ptb/ejgc/ejgc3/cralsvereeck%20paper.pdf [accessed July 18, 2016], 2.
 Id. at 3-4.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 14-17.
 E. Dionco-Adetayo, Determinants of Small firms’ Entrepreneurial success In a developing economy (2004); and H. Rahman and H. Singh, “Entrepreneurial Support and its levels of Success”, Global Journal for Research Analysis, 3(11) (2014).
 H. Rahman and H. Singh, “Economic and Environmental factors leading to Entrepreneurial success”, Indian Journal of Applied Research, 4(12 (2014)).
 C. Holliday, S. Schmidheiny and P. Watts, Walking the Talk – the Business Case for Sustainable Development (Sheffield: Greenleaf, 2002).
 W. Young and F. Tilley, “Can Businesses move Beyond Efficiency? The Shift towards Effectiveness and Equity in the Corporate Sustainability Debate”, Business Strategy and the Environment, 15 (2006), 402, 403.
 Id. at 402.
 F. Tilley and Young, “Sustainability Entrepreneurs — Could they be the True Wealth Generators of the Future?”, Greener Management International, 55 (2009), 79.
 E. Crals and L. Vereeck, “Sustainable entrepreneurship in SMEs—Theory and Practice”, http://www.inter-disciplinary.net/ptb/ejgc/ejgc3/cralsvereeck%20paper.pdf [accessed July 18, 2016], 7-8.
 J. Amoros and N. Bosma, Global Entrepreneurship Monitor 2013 Global Report: Fifteen Years of Assessing Entrepreneurship across the Globe (2014), 37-41.
 Z. Acs and L. Szerb, “The Global Entrepreneurship and Development Index (GEDI)” (Paper presented at Summer Conference 2010 on “Opening Up Innovation: Strategy, Organization and Technology”, Imperial College London Business School, June 2010).
 D. Audretsch, “High-Growth Entrepreneurship”, OECD (March 2012).
 The Association of Chartered Certified Accountants, High-growth SMEs: understanding the leaders of the recovery (July 2012) (based on data and analysis provided by Delta Economics in “Challenges and Opportunities for Growth and Sustainability”).
 J. Llisterri and J. Garcia-Alba, HGSMEs in Latin American Emerging Economies. The paper was prepared for “The OECD Kansas City Workshop”, Session III. “From Invention to the Market Place: Acquiring knowledge and intellectual assets: The interaction between large firms and small business in the fast growth process”.
 The Association of Chartered Certified Accountants, High-growth SMEs: understanding the leaders of the recovery (July 2012) (based on data and analysis provided by Delta Economics in “Challenges and Opportunities for Growth and Sustainability”).
 B. Burlingham, “Best Small Companies”, Forbes (February 8, 2016), 86.
 Z. Acs and N. Virgill, “Entrepreneurship in Developing Countries”, Jena Economic Research Papers, No. 2009-023, March 2009, 31.
 Id. at 31 (citing A. Smart and J. Smart, Petty Capitalists and Globalization: Flexibility, Entrepreneurship, and Economic Development (Albany, NY: State University of New York Press, 2005).
 Id. at 31 (citing M. Ayyagari, T. Beck and A. Demirgüc-Kunt, Small and Medium Enterprises Across the Globe. (Washington DC: World Bank Policy Research Working Paper No. 3127, 2003)). With regard to the “entrepreneurial landscape in Africa”, which includes informal and formal sector businesses, traditional and modern, indigenous and foreign-owned enterprises geographically dispersed in rural and urban areas, see B. McDade and A. Spring, “The ‘New Generation of African Entrepreneurs’: Networking to Change the Climate for Business and Private Sector-Led Development”, Entrepreneurship and Regional Development, 17 (January 2005), 17–42.
 Id. (citing J.W. Carland, F. Hoy, W. Boulton and J.C. Carland., “Differentiating Entrepreneurs from Small Business Owners: A Conceptualization”, The Academy of Management Review, 9(2) (1984), 354-359, 357).
 Id. (citing J. Schumpeter, The Creative Response in Economic History, The Journal of Economic History, 7(2) (1947), 149-159, 151). Notice should be taken that there is also debate as to which firms in developing countries are most effective at driving innovation. Amsden, for example, has argued that large privately-owned enterprises are the innovative firms in developing countries since they are more flexible and innovative then subsidiaries of foreign multinationals or state-owned enterprises. See A. Amsden, “Firm Ownership and Entrepreneurship” in A. Szirmai, W. Naude and M. Goedhuys (Eds.), Entrepreneurship, Innovation and Economic Development (Oxford: Oxford University Press, 2011), 65-77.
 R. Scase, “The Role of Small Businesses in the Economic Transformation of Eastern Europe: Real but Relatively Unimportant” International Small Business Journal, 16 (1997), 113-121; R. Scase, “Entrepreneurship and proprietorship in transition: policy implications for the SME sector”, in R. McIntyre, R. Dallago and B. Houndsmill (Eds.) Small and Medium Enterprises in Transitional Economies (Basingstoke: Palgrave Macmillan, 2003), 64-77.
 S. Mani, The Growth of Knowledge-intensive Entrepreneurship in India, 1991-2007 (Maastricht, The Netherlands: United Nations University-MERIT Working Paper Series No. 2009-051, 2009), 7.
 See, e.g., L. Busenitz and J. Spencer, “Country Institutional Profiles: Unlocking Entrepreneurial phenomena”, Academy of Management Journal, 43(5) (2000), 994-1003.
 Z. Acs and L. Szerb, “The Global Entrepreneurship and Development Index (GEDI)” (Paper presented at Summer Conference 2010 on “Opening Up Innovation: Strategy, Organization and Technology”, Imperial College London Business School, June 2010).
 D. Acemoglu and S. Johnson, “Unbundling institutions”, Journal of Political Economy, 113(5) (2005), 949-995.
 F. Fukuyama, “The End of History?”, The National Interest, 16 (1989), 3-18.
 For further discussion of both the GEM and the Global Entrepreneurship and Development Index, see “Entrepreneurship: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).
 D. Lingelbach, L. De La Vina and P. Asel, What’s Distinctive about Growth-Oriented Entrepreneurship in Developing Countries? (San Antonio, TX: UTSA College of Business Center for Global Entrepreneurship Working Paper No. 1, March 2005).
 Id. at 3 (citing C. Liedholm and D. Mead, Small Enterprises and Economic Development: The Dynamic Role of Micro and Small Enterprises (London: Routledge, 1999).
 Id. at 4.
 Id. at 5.
 Id. at 7.
 S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 274-276.
 W. Gartner, “’Who is an Entrepreneur?’ Is the Wrong Question”, American Journal of Small Business, Spring 1988, 11-32, 12.
 Id. at 13-20. “Founders’ Traits and Skills” in “Entrepreneurship: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org) includes additional discussion of the personality traits of persons likely to start a new business and the personal and professional skills that founders should possess in order to increase their likelihood of success in launching a new business.
 S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257, 258 (“In our arguments, we explicitly assume that all human action is the result of both motivational and cognitive factors, the latter including ability, intelligence and skills. We also assume that entrepreneurship is not solely the result of human action; external factors also play a role . . .”)
 This view was consistent with the observations of others such as Aldrich and Zimmer, who wrote that entrepreneurial activity “can be conceptualized as a function of opportunity structures and motivated entrepreneurs with access to resources”. See H. Aldrich and C. Zimmer, “Entrepreneurship through social networks” in D. Sexton and R. Smilor (Eds.), The art and science of entrepreneurship (Cambridge, MA: Ballinger, 1986), 3-23, 3.
 S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 276 (“Motivations might be more or less stronger than these other factors in the degree that they influence particular transitions points. In addition, there might be important and interesting interaction effects between motivations and opportunities, [knowledge, skills and abilities] and environmental factors.”)
 J. Baum, E. Locke and K. Smith, “A multi-dimensional model of venture growth”, Academy of Management Journal, 44(2) (2001), 292–303.
 S. Shane, E. Locke and C. Collins, “Entrepreneurial motivation”, Human Resource Management Review, 13 (2003), 257-279, 273.
 H. Kantis, “A Systematic Approach to Enterprise Creation” in H. Kantis (Ed.), Developing Entrepreneurship: Experience in Latin America and Worldwide (Washington, DC: Inter-American Development Bank, 2005), 17-27.
 Id. at 19-21.
 The summary description of each of the categories is based on H. Kantis, “A Systematic Approach to Enterprise Creation” in H. Kantis (Ed.), Developing Entrepreneurship: Experience in Latin America and Worldwide (Washington, DC: Inter-American Development Bank, 2005), 17-27, 20-22.
 N. Wasserman, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup (Princeton, NJ: Princeton University Press, 2012).
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